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1. Company Snapshot

1.a. Company Description

Q2 Holdings, Inc.provides cloud-based digital banking solutions to regional and community financial institutions (RCFIs) in the United States.The company offers Q2 Consumer Banking, a browser-based digital banking solution and comprehensive financial institution branded digital banking capabilities; Q2 Small Business and Commercial, a mobile and tablet digital banking solution; Q2mobile Remote Deposit Capture, a partnered solution that allows remote check deposit capture.


It also provides Q2 Sentinel, a security analytics solution; Q2 Patrol, an event-driven validation product; Q2 SMART, a targeting and messaging platform; and Q2 CardSwap that allows account holders receiving newly issued cards to automatically change their payment information.In addition, the company offers Q2 Gro, a digital account opening, and digital sales and marketing platform; Q2 Biller Direct, a bill payment solution; ClickSWITCH allows financial institutions to direct deposits to the end user.Centrix Dispute Tracking System, an electronic transaction dispute management solution; Centrix Payments I.Q. System, an ACH file monitoring and risk reporting solution; Centrix Exact/Transaction Management System, a fraud prevention tool; and Q2 Caliper Software Development Kit.


Futher, it provides Q2 Contextual PFM, which allows end users to add external accounts and view them together with internal accounts on digital banking home page; Q2 Goals that enables end users to establish and save towards specific savings goals; Q2 Cloud Lending, a digital lending and leasing platform; PrecisionLender platform, a cloud-based, data-driven sales enablement, pricing, and portfolio management solution; and Q2 BaaS, a portfolio of open API financial services.The company was formerly known as CBG Holdings, Inc.and changed its name to Q2 Holdings, Inc.


in March 2013.Q2 Holdings, Inc.was founded in 2004 and is headquartered in Austin, Texas.

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1.b. Last Insights on QTWO

Q2 Holdings' recent performance was negatively impacted by decelerating topline growth, despite a strong backlog and expanding margins. The company's Q3 earnings beat estimates, with revenue growth of 13% and a 21% rise in RPO. However, a "hold" rating from brokerages, with 10 hold ratings and 9 buy ratings, suggests moderate investor sentiment. Additionally, Ethic Inc.'s recent $302,000 investment and State of New Jersey Common Pension Fund D's $2.05 million position may indicate growing institutional interest.

1.c. Company Highlights

2. Q2 Holdings Delivers Strong Q3 2025 Results with 15% YoY Revenue Growth

Q2 Holdings reported a robust financial performance in Q3 2025, with revenue reaching $201.7 million, representing a 15% year-over-year increase and a 3% sequential growth. Adjusted EBITDA was a record $48.8 million, up 50% from the prior year period, with a margin of 24.2%. The company's earnings per share (EPS) came in at $0.57, beating estimates of $0.55. The strong financial results were driven by the company's continued momentum in acquiring new customers, with 7 total Tier 1 and enterprise deals booked in the quarter.

Publication Date: Nov -15

📋 Highlights
  • Revenue & Profitability Growth:: Q3 revenue reached $202M (+15% YoY), adjusted EBITDA hit $49M (24.2% margin), and free cash flow hit $37M.
  • Subscription Revenue Shift:: Subscription revenue now 82% of total revenue, driving higher-margin growth with EBITDA up 50% YoY to $48.8M.
  • 2026 Guidance:: Expects 13.5% sub ARR growth, 60% gross margin, and 250 bps EBITDA margin expansion, with FCF conversion ≥90%.
  • AI & Innovation Momentum:: AI initiatives (Dev Days, Innovation Studio) show progress, with partners co-developing solutions and 7+ Tier 1 deals booked.
  • Cross-Sell Potential:: Only 10% of Tier 1 customers have all three core products, indicating $200M+ untapped cross-sell value in 2026.

Revenue Mix and Profitability

The company's subscription revenue as a percentage of total revenue increased to 82%, highlighting the ongoing shift in revenue mix towards higher-margin subscription-based revenues. This shift is expected to continue driving the company's profitability, with gross margins expected to reach at least 60% in 2026. As Matt Flake mentioned, "We're excited about the changes that put us in a position to accelerate our products, go-to-market, and AI initiatives."

Guidance and Outlook

Q2 Holdings updated its financial outlook for 2026, expecting full-year subscription revenue growth of approximately 13.5%, total non-subscription revenue to decline in the mid-single digits year-over-year, and adjusted EBITDA margin expansion of approximately 250 basis points. The company's guidance implies more operating leverage than previously expected, with a reiteration of the full year free cash flow conversion outlook of at least 90% for 2026.

Valuation and Growth Expectations

Analysts estimate next year's revenue growth at 10.3%. With a current P/S Ratio of 6.1 and EV/EBITDA of 65.01, the market is pricing in significant growth expectations. The company's strong demand for its digital banking solutions and its commitment to investing in AI, fraud, and innovation studio are expected to drive future growth.

Industry Positioning and Future Prospects

Q2 Holdings is well-positioned to benefit from the core consolidation in the industry, which is expected to generate RFP opportunities for the company in the coming years. The company's strong product offerings, trusted partnerships with customers, and significant cross-sell opportunity within its customer base are expected to drive continued growth and profitability.

3. NewsRoom

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Does Q2 Holdings (QTWO) Have the Potential to Rally 26.33% as Wall Street Analysts Expect?

Dec -03

Source: zacks.com

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Creative Planning Purchases 2,201 Shares of Q2 Holdings, Inc. $QTWO

Nov -24

Source: defenseworld.net

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Q2 Holdings, Inc. (QTWO) Presents at Citi's 14th Annual FinTech Conference Transcript

Nov -18

Source: seekingalpha.com

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Q2 Holdings: A Great Time To Step In As Banking Fears Are Overblown

Nov -17

Source: seekingalpha.com

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Q2 Recognized as a Top Workplace by Austin American-Statesman for 2025

Nov -17

Source: businesswire.com

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Q2 Named a Leader in IDC MarketScape: North America Retail Digital Banking Solutions 2025-2026 Vendor Assessment

Nov -17

Source: businesswire.com

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Wall Street Analysts Predict a 28.28% Upside in Q2 Holdings (QTWO): Here's What You Should Know

Nov -14

Source: zacks.com

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Q2 Holdings: Solid Execution, But The Premium Story Isn't Fully Back Yet

Nov -13

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (11.16%)

6. Segments

Subscription

Expected Growth: 12%

Q2 Holdings' subscription growth is driven by increasing demand for digital banking solutions, expansion into new markets, and strategic partnerships. The company's cloud-based platform and innovative products, such as account opening and lending solutions, are attracting more financial institutions, resulting in a 12% growth rate.

Services and Other

Expected Growth: 8%

Q2 Holdings' Services and Other segment growth of 8% is driven by increasing demand for digital transformation in the financial services industry, expansion of existing customer relationships, and strategic partnerships. Additionally, the company's investments in cloud-based solutions, data analytics, and cybersecurity services are contributing to the growth.

Transactional

Expected Growth: 9%

Q2 Holdings' transactional segment growth of 9% is driven by increasing adoption of digital banking solutions, expansion of existing customer relationships, and strategic partnerships. Additionally, the company's investments in cloud-based infrastructure and security enhancements have improved scalability and reliability, attracting new customers and driving revenue growth.

7. Detailed Products

Q2 Digital Banking Platform

A comprehensive digital banking platform that enables banks and credit unions to provide their customers with a seamless online and mobile banking experience.

Q2 Sentient

An AI-powered customer service chatbot that helps financial institutions provide 24/7 customer support and improve customer engagement.

Q2 Biller Direct

A bill payment solution that enables customers to pay bills securely and efficiently through their online banking platform.

Q2 Treasury Management

A treasury management solution that helps businesses manage their cash flow, optimize investments, and mitigate risk.

Q2 CardSwap

A digital card management solution that enables customers to manage their debit and credit cards, set up alerts, and receive notifications.

Q2 Person-to-Person Payments

A person-to-person payment solution that enables customers to send and receive money securely and efficiently.

Q2 Account Opening

A digital account opening solution that enables customers to open new accounts online or through their mobile device.

8. Q2 Holdings, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Q2 Holdings, Inc. operates in the digital banking and lending industry, where substitutes are limited. However, the company faces competition from traditional banks and fintech companies that offer similar services.

Bargaining Power Of Customers

Q2 Holdings, Inc. has a diverse customer base, including community banks, credit unions, and fintech companies. While customers have some bargaining power, the company's strong brand and product offerings mitigate this force.

Bargaining Power Of Suppliers

Q2 Holdings, Inc. has a diversified supplier base, and the company is not heavily dependent on a single supplier. This reduces the bargaining power of suppliers.

Threat Of New Entrants

The digital banking and lending industry is rapidly evolving, and new entrants can easily disrupt the market. Q2 Holdings, Inc. faces a high threat of new entrants, which can impact its market share and revenue.

Intensity Of Rivalry

The digital banking and lending industry is highly competitive, with many established players and new entrants vying for market share. Q2 Holdings, Inc. faces intense rivalry from competitors, which can impact its pricing power and market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 54.93%
Debt Cost 3.95%
Equity Weight 45.07%
Equity Cost 11.27%
WACC 7.25%
Leverage 121.85%

11. Quality Control: Q2 Holdings, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Smartsheet

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Quality: 4.6

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Q2 Holdings

A-Score: 3.6/10

Value: 1.2

Growth: 7.6

Quality: 4.9

Yield: 0.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

73.31$

Current Price

73.31$

Potential

-0.00%

Expected Cash-Flows